Stock Market Wealth and Worker Output

58 Pages Posted: 27 Aug 2020

See all articles by Teng Li

Teng Li

Sun Yat-sen University

Wenlan Qian

National University of Singapore - NUS Business School

Wei A. Xiong

Shenzhen Stock Exchange

Xin Zou

Hong Kong Baptist University (HKBU)

Date Written: July 19, 2020

Abstract

This paper uses individual-level data linking stock investments to work performance to examine how changes in stock market wealth affect worker output. Exploiting large return variations over time and across investors, we document a 10% increase in monthly stock investment returns is associated with a decrease of 3.9% in the same investor’s next-month work output. The negative output response is not driven by concurrent economic conditions, pronounced when focusing on more idiosyncratic stock investment returns, and moreover is unexplained by investor-specific liquidity needs. Consistent with the wealth-effect interpretation, the effect is stronger for higher-income workers. In the negative-return domain, interestingly, a decline in stock investment returns is followed by lower output, especially for male, younger, less educated, and lower-income workers. Overall, our results highlight a novel channel of transmitting stock market fluctuation to the real economy through labor supply.

Keywords: Stock Investment Return, Stock Market Wealth, Worker Output, Work Performance, Labor Supply, Wealth Effect, Household Finance

JEL Classification: D14, G12, G51, J22, J31

Suggested Citation

Li, Teng and Qian, Wenlan and Xiong, Wei A. and Zou, Xin, Stock Market Wealth and Worker Output (July 19, 2020). Available at SSRN: https://ssrn.com/abstract=3655592 or http://dx.doi.org/10.2139/ssrn.3655592

Teng Li

Sun Yat-sen University ( email )

135, Xingang Xi Road
Guangzhou, Guangdong 510275
China

Wenlan Qian (Contact Author)

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

HOME PAGE: http://sites.google.com/site/wenlanqian/

Wei A. Xiong

Shenzhen Stock Exchange ( email )

2012 Shennan Blvd., Futian District
Shenzhen
China

Xin Zou

Hong Kong Baptist University (HKBU) ( email )

Department of Economics
Kowloon, Hong Kong
Hong Kong

HOME PAGE: http://sites.google.com/site/shirleyxinzou/

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